U.S. Dollar, Treasury Prices Sink On Report Trump Is Firing Fed Chief

The U.S. dollar fell sharply after Bloomberg, citing an unidentified White House official, reported that President Donald Trump is likely to fire Federal Reserve Chair Jerome Powell soon, Reuters reported.

Investors have been on edge for weeks amid speculation that Trump might remove Powell before his term ends next May.

The dollar dropped as much as 0.7% against a basket of major currencies within minutes of the news. Rate-sensitive sectors, including U.S. regional banking stocks, also fell, while gold rallied.

Longer-dated Treasury bonds sold off, with the 30-year yield rising to 5.06%, up nearly 5 basis points on the day.

Earlier in the session, it had traded at a low of around 4.97%, down 5 bps from Tuesday.

“If that does happen—if Trump fires Powell—it would be very damaging for investor confidence in the dollar. That’s why we’re seeing the heavy selling now, and it could extend further,” said Lee Hardman of MUFG in London.

Investors have been on edge for weeks amid speculation that Trump might remove Powell before his term ends next May. The president has repeatedly criticized Powell for not cutting interest rates aggressively enough.

“If we get a headline confirming Powell’s removal today, we’re looking at a much bigger sell-off in the dollar,” said Francisco Pesole of ING in London. “Federal Reserve independence is the foundation of the U.S. dollar’s status as the No. 1 reserve currency.”